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The view in the deep ocean
Martin Stopford President,
Clarkson Research
WORKSHOP ON MARITIME CLUSTERS AND GLOBAL CHALLENGES 50th Anniversary of OECD WP6
Challenges in the world maritime industry.
Martin Stopford, President CRSL 1 Dec 2016
Martin Stopford, President CRSL 1 Dec 2016
In 1966 Blue Funnel’s Priam multi-deck was the latest thing in liners
Containers on deck! For 100 years the ships improved by evolution but the system did not. The liner and tramp service continued unchanged. But the world changed and needed a different system – a “revolution”
In 1966 tramps were big business for shipbuilders
• The replacement of the liberty ships was a big issue in 1966.
• 30 designs were put forward to replace the 700 remaining Liberty Ships
• The SD14 and Freedom did best
• 350 SD14 built over next 20 years
Martin Stopford, President CRSL 1 Dec 2016
Malcolm McLean “couldn’t remember where he got the idea!”
First international container service, purpose built Fairlane discharging Rotterdam May 1966
S5: In1966 the container “revolution” took its first step
Martin Stopford, President CRSL 1 Dec 2016
In December 1966 the first VLCC, the Idemitsu Maru went into service (209,413 dwt)
Martin Stopford, President CRSL 1 Dec 2016
1. Shipping cycles getting bigger 2. Sea trade growth slowing 3. Regional trade transformation 4. Shipyard capacity management 5. The zero emissions agenda 6. How to harness digital technology? 7. Is the business model serviceable?
50 YEARS LATER, MANY NEW CHALLENGES
Martin Stopford, President CRSL 1 Dec 2016
1. Shipping cycles getting bigger
In today’s simplistic business model, cycles are the drivers of change
The Shipping Market Cycle Today - 25% below 25 year trend
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Cla
rkse
a In
dex
$0
00
/day
The Clarksea index shows the average earnings of tankers, bulkers, containerships & gas
Clarksea Index was
$11,768/day last week
25 year trend 25 year average $15,582/day
Martin Stopford, President CRSL 1 Dec 2016
5-Dec-16 Lecture 3: Shipping Market Cycles 10 wwww.maritimelectures.com © Marecon Ltd wwww.maritimelectures.com © Marecon Ltd
Looks like the longest dry cargo cycle since 1845!
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1725 1745 1765 1785 1805 1825 1845 1865 1885 1905 1925 1945 1965 1985 2005 2025
If the dry market recovers in 2020 this cycle will have lasted
17 years
Cyc
le le
ngt
h in
yea
rs
Sailing ship era 1743 to 1870
Source: based on the MEFI index produced by Martin Stopford
Shows FIRST year of each cycle & length from beginning of peak to beginning of next peak
05/12/2016 Maritime Lectures – Guest Lecture 2: Shipping & Shipbuilding Market Outlook
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-15.0
-10.0
-5.0
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15.0
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IND
UST
RIA
L P
RO
DU
CTI
ON
% P
A
World ip % PA
Credit Crisis Dot.com
Crisis
VERY WEAK INDUSTRIAL
GROWTH SINCE 2009
S6: World Industry growth rate to September 2016 – very sluggish
Updated feb 2016
05/12/2016 Maritime Lectures – Guest Lecture 2: Shipping & Shipbuilding Market Outlook
15
Sea trade growth edges down - about 2.3% growth likely in 2016
7.3
%
0.7
%
3.0
%
5.7
%
6.6
%
4.5
%
4.8
%
4.5
%
2.5
%
-3.7
%
9.3
%
4.5
%
4.2
% 3.4
%
3.2
%
2.6
%
2.3
%
-4%
-2%
0%
2%
4%
6%
8%
10%
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(e)
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(f)
% g
row
th o
f tr
ade
in y
ear
forecast
Growth of sea trade 2000-2016 (annual % change)
3. Regional Trade Transformation
The OECD trade share shrinking & owners moving offshore
Martin Stopford, President CRSL 1 Dec 2016
1. In 1966 the Maritime World was dominated by the OECD
0%
10%
20%
30%
40%
50%
60%
70%
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90%
1966 1976 1986 1996 2006 2016
OECD Imports Non-OECD Imports
OECD sea imports 75% of total
Non-OECD sea Imports 25% of total
Source: data collected by martin stopford from various sources, mainly United Nations and UNCTAD
1. OECD imported 75% of cargo
2. Multinationals managed transport
3. They imported raw materials
4. And exported manufactures
Sea trade was growing very fast Seaborne imports by region (% of world trade)
9. Break-bulk liners struggling 10. Cargo handling costs escalating 11. Could not handle expending trade 12. First container service in 1966
Liners making move to containerisation
Bulk market - industrial shipping was developing
5. Cargo owners lead the change 6. They built big, specialised ships & 7. Owned or chartered most of fleet 8. E.g. 80% tankers on timecharter
Martin Stopford, President CRSL 1 Dec 2016
The bulkers & liners struggle with mature technology
5. The bulk & liner revolutions are over
6. Cargo owners have stepped away
7. Designers struggling to improve ships
8. Very big containerships disappointing
2. In 2016 the OECD is still quite important, but declining at 1% a year
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
1966 1976 1986 1996 2006 2016
OECD Imports Non-OECD Imports
OECD Imports
37%
Non-OECD Imports
63%
OECD Imports
77%
Non- OECD
Imports 23%
1. OECD now imports only 37% of cargo
2. China and Asia driving trade
3. Non-OECD 63% and maybe 75% soon
4. Non-OECD has six times the population
Sea trade growing but OECD losing market share
The future – another revolution desperately needed
9. Shipping investors need a new vision
10. World economy needs new services
Seaborne imports by region (% of world trade)
Martin Stopford, President CRSL 1 Dec 2016
In 1966 only 13% of the fleet was flagged out. Today it is over 70%
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National Flag Foreign Flag
Move to offshore flag accelerates in
2000s boom
National flag fleet static
• 1.3 billion DWT of “flagged out” tonnage
• Over 70% of the merchant fleet is now registered offshore
• Up from 42% at the end of the 1980s (see chart)
• Shipping now a global business
Million dwt
Martin Stopford, President CRSL 1 Dec 2016
4. Shipyard Capacity management
We need a better strategy for managing the supply of ships, but are not likely to get one
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% o
f G
RT
Lau
nch
es in
yea
r
Regional Shipbuilding Trends 1902-2015: different dynamics today
Korea
Japan Europe
other countries
GT 37.3%
GT 35.4%
GT 19.1%
GT 2.4%
China
China’s shipbuilding strategy has changed from “getting bigger” to “getting stronger” GT 5.8%
Martin Stopford, President CRSL 1 Dec 2016
28 33 39 39 36 42 46 47 51 55 62 73 77 83
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1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Del
iver
ies
of
dem
olit
ion
Mill
ion
DW
T
Orderbook slippage
Orderbook April 2016
Deliveries
Series4
Stage 2 (Build & sell contracts for
new capacity)
Stage 1 (expand existing
capacity)
Stage 4 (Close 581uneconomic
shipyards)
Stage 5 (Slow production &
diversify in 423 active shipyards)
Del
iver
ies
bas
ed o
n o
/bo
ok
Stage 3: orderbook
slippage
World shipbuilding output & capacity 1994- 2017
In 2009 there were 992 active yards In 2016 there were 423 active yards
forecast
Martin Stopford, President CRSL 1 Dec 2016
5. The Zero Emissions Challenge
Yamaha have a zero emission bike, but a zero emission cargo ship will need extreme technology
In 2066 seaborne trade could be 46 billion tonnes – or could it?
y = 2078e0.0308x
0
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Imp
ort
s –
mill
ion
to
nn
es
Total Trade, 46 billion tonnes
Source: data collected by martin stopford from various sources, mainly United Nations and UNCTAD
Martin Stopford, President CRSL 1 Dec 2016
6. How to harness digital technology
Are we smart enough to use the information & communications technology (ICT) revolution to revolutionize sea transport?
Who is smart?
Three ways change the business Model
Martin Stopford, President CRSL 1 Dec 2016
1. Smart Ships – with much better QA & efficiency standards;
2. Smart Fleets – which manage the smart ships like a transport factory (e.g. a BMW factory).
3. Smart Global Logistics – which integrate the whole thing door to door
Massively more efficient satellite communications are removing the 5000 year old need to treat the ship as the business unit
S10 : The Smart-Shipping “Toolbox” creates opportunities:-
Martin Stopford, President CRSL 1 Dec 2016
1.Satellite communication: new INMARSAT Ka band global systems (99% reliable) broad band data to be collected, processed & beamed ashore. Submarine cables too.
2.Telematics: "sensors" & FPGAs generate digital information about equipment & ship - cheaper and better than ever.
3.Data Storage: The cloud provides storage for data generated by sensors. Analyse “Big Data” to improve performance.
4.Smart phone-style apps : to do specific jobs without big computer systems & management information
5.Information systems: management know exactly what’s going on and performance levels. “Deep learning” is getting better.
6.Automation: feedback loops allow automation of many tasks (navigation, maintenance, operations etc)
Railnova information system
Auxiliary sealed & monitored
Young engineer with degree
No 1 hold 12,600m3
No 2 hold 13,300m3
No 3 hold 13,000 m3
No 4 hold 12,300 m3 floodable
No 5 hold 13,000 m3
No 6 hold 13,000 m3
No 7 hold 12,200 m3
5. Navigation & manoeuvring
1. Propulsion plant control
2 Auxiliary power management
3. Auxiliary machinery operation
4. Ballast & trim management
6. Cargo handling operations
7. Administration of maintenance
8. Supply of spares management.
Alarm management
Thruster control
CONNECTIVITY+ SEMI-AUTOMATION+DASHBOARDS etc
On
bo
ard co
mm
un
ication
s 1: Smart Ships – smarter operations, better quality control
Martin Stopford, President CRSL 1 Dec 2016
Martin Stopford, President CRSL 1 Dec 2016 Source: Martin Stopford 2016
DATA READY SHIPS
1. Navigation 2. Operations 3. Comms.
Core systems
1. SHIP TEAMS
ship servers managing data, apps & comms
6. SHIPBUILDERS & EQUIPMENT
SUPPLIERS
5.CUSTOMERS WITH CARGO SYSTEMS
7. PORTS & THROUGH
TRANSPORT
TRA
NSP
OR
T FA
CTO
RY
Warehouse (on cloud?)
Company Systems:- 1. Process management 2. STQ monitoring 2. Messaging system 3. Intranet & dashboards 3. Phone system 4. LPWAN & APIs
3. SYSTEM
S. TEAM
S
1. Support systems 2. Process data 3. Automation 4. Apps, FPGAs etc 5. Manage stats
1. Technical support 2. Maintenance systems 3. Regulatory reports 4. Fleet performance 5. Personnel management
4. TEC
HN
ICA
L TEAM
S
2. M
AN
AG
EMEN
T
LOCATION AN ISSUE
Volume, Velocity, Variety
2: The Smart Fleet – run a fleet of ships as a transport factory
Martin Stopford, President CRSL 1 Dec 2016
3. The Smart Global Network –integrated transport systems
Integrating sea cargo and inland transport was a goal of the 1960s but it never happened.
This vision is difficult for slim organizations.
Smart Shipping can breathe life into the through transport system, opening up a new era of global trade
The challenge is to generate new business by integrating sea transport into the global trade network